Disposal of Scrap, Surplus and

Obsolete items
Prof P.P.Sengupta

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 Why is Disposal Needed ?
• Industrial wastes and scraps include spoiled
raw materials, defective parts, rejected
components, production wastes, etc. that
holds a commercial value, and therefore, they
should be discarded at periodic intervals and
the amount should be accurately recorded
into the books of accounts. Therefore, surplus
and scrap management plays a key role in
proper management of operations.
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 What is Disposal ?
• Disposal is an activity of liquidating the
unusable / unwanted holdings.
• It releases valuable storage space and locked
up value. It is therefore, necessary to dispose
off the unwanted holdings following laid down
procedures with due regard to economy and
transparency.

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What are the Types of Items to be Disposed

• Waste
• Scrap
• Surplus items
• Obsolete items
• Unserviceable items
• Empties

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 What is Waste ?
• Waste (or wastes) are unwanted or unusable
materials. Waste is any substance which is
discarded after primary use, or is worthless,
defective and of no use.
• A waste product may become a by-product,
joint product or resource through an invention
that raises a waste product's value above zero.

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 What is Scrap ?
• Scrap consists of recyclable materials, usually metals, left over from
product manufacturing and consumption, such as parts of vehicles,
building supplies, and surplus materials.
• Unlike waste, scrap has monetary value, especially recovered
metals, and non-metallic materials are also recovered for recycling.
• Once collected the materials are sorted into types -- typically metal
scrap will be crushed, shredded and sorted using mechanical
process.
• Metal recycling, especially of structural steel, ships, used
manufactured goods, such as vehicles and white goods, is a major
industrial activity with complex networks of wrecking yards, sorting
facilities and recycling plants.

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 Hazardous Scraps
• Hazardous Scraps: Hazardous Scraps are wastes
with properties that make them dangerous or
potentially harmful to human health or the
environment. Hazardous wastes can be liquids,
solids, contained gases, or sludge. Disposal of
Hazardous scraps should be given priority and
disposed off keeping in view the guidelines of GoI
/ statutory authorities like Central/State Pollution
Control Board (CPCB / SPCB) from time to time.

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 What is Surplus items?
• Surplus means any materials, equipment or physical
assets that no longer have any use to the organisation,
and includes obsolete, scrap and excess inventory .
• Surplus arises like when purchases are made in larger
quantities than the actual consumption or when
operations are suddenly reduced or produce buffer
stock or when there is a change in specification or size
or sometimes when wrong items have been purchased
when a project is completed. This is when there is a
need to dispose of them because they are not used by
the companies.
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 What is Obsolete Items

• Obsolete Materials means: any material which the

Seller has purchased or issued a purchase order to
the material vendor that is, no longer being
required by the Seller to manufacture Products (or
being otherwise unsuitable for use in the
manufacture of Products due to the passage of
time.
• In case of Spare parts, when a Equipment
becomes outdated , the spare parts for the
Equipment become obsolete.
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 What is unserviceable Items

• Unserviceable stores-Items that are not in working

order, outlived. its normal span of life and are
beyond economic repair.
• Equipment having premature failure and Beyond
Economic Repairs: Sometimes premature failure of
some Equipment / P&M occurs and the cost of their
repairs is not economical.
• As such, in the interest of the company, these
Equipment/P&Ms are to be declared as
unserviceable before replacing the same.
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 What is Empties

• Second Hand Empties: In the process of

receipt, issue and consumption of stores,
various types of packing/packing materials are
generated as ‘empties’ like containers, plates,
bottles, plastic jars, drums etc. They may be
serviceable but surplus to the requirement of
the company or may be unserviceable.

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Identification of Surplus and Scrap
• Second Hand Empties, Old, Used and
Unserviceable Equipment / P&M, Spare Parts ,
Stores , scraps and Hazardous Scraps ,
separately .
• To be moved to a Scrap Yards with secured
fencing and illumination

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 Formation of Lots
• Scrap iron and steel will be arranged in a lot of suitable
quantity and the scrap heap should be properly arranged
to enable the Purchasers to make a fair assessment of
the Lot.
• Lots will be sold on “as is where is" basis, which denotes
that the equipment / P&M /scrap materials will be sold in
whatever condition they exist, and in whatever quantities
or tonnage available and that the Management gives no
guarantee as to the actual weight involved. Such a
condition is essential to obviate dispute with Purchasers
and legal complications.
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 Formation of Lots
• Normally the Equipment / P&M should be sold on
weight basis.
• Only the Equipment/P&M items, which can be
delivered in as it is intact condition without any
cutting/dismantling, shall be processed for sale on
number basis.
• If Equipment/P&M items are to be allowed for
cutting/dismantling at the time of lifting, the lot for
the same must be processed for sale on weight
basis only
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 Formation of Lot
• The lots will be properly segregated and under
no circumstances, working stocks will be
mixed up with stores under disposal.
• The Lot No. of each Lot should be clearly
displayed.
• Where a bid can be secured as a rate per item
instead of a total value

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 Formation of Lot
• If Equipment/P&M items are to be allowed for
cutting/dismantling at the time of lifting, the lot for the
same must be processed for sale on weight basis only.
• The survey off report should be prepared precisely taking
care of the above provisions and should clearly indicate
whether the Lot being so offered for sale will be allowed
for dismantling/cutting before lifting or otherwise.
• A condition should be incorporated in the terms of sale
that, if the weight actually offered at the time of delivery
is less than the Weight originally declared, a
proportionate refund will be granted to the purchaser
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 Survey off Committee
• In order to identify and declare such items as
scrap, a standing Survey off Committee must
be formed by the Organisation.
• Their job is to ensure that no good and usable
materials are sold as scrap or unservicable
• They also fix a “ Reserve Price”

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 Duty of Survey Off Committee
• The Survey off Committee will carry out physical survey of all the
Equipment /P&M and other scrap materials, put up for disposal
and fix up the reserve value in respect of individual lots.
• However, before fixing the reserve value, the committee will
ensure that: The assemblies/ sub-assemblies in case of
equipment / P&M which have been declared serviceable and
useable, have been removed from the surveyed off lots to be
sold and have been deposited at designated place, with proper
recording.
• The equipment / P&M Sl. no. to be mentioned in the survey off
report is clearly visible on the lot and, if required, should be
rewritten clearly.

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 Methods of Lot formation
• Scrap lots to be sold to be kept separately and not mixed
with other useful items of the project.
• Lot Number on each scrap lot should be written clearly
for easy inspection and delivery
• In case of vehicles, it should be ensured that surrender /
de registration certificate from the concerned
department) has been obtained before putting up for
final disposal.
• The lot should contain similar type / nature/ quality of
material (For example MS scrap should not be mixed with
copper or special steel etc.) as far as practicable.
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 Fixation of Reserve Price
• The reserve value should be carefully fixed by the survey off
committee taking into consideration of relevant information
like present physical condition, Location of the Lot, the written
down value (wherever applicable), serviceable assembly / sub
assembly/ parts taken out from the machine, the last sale value
realized in the sale of similar lot, current market trend etc.
• In the normal circumstances, i.e., if the assemblies/sub-
assemblies/parts have not been taken out, then the reserve
value should not be less than the written down value.
• So, whenever the reserve value is less than written down value
(e.g. IT Equipment, Medical Equipment, etc.), suitable
justification should be recorded in the survey off report.
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 Method of Disposal
• Limited Tender
• Open Tender
• E Auction

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 Conduct of e Auction
• The list of disposable Equipment/P&M and Spares/stores will be
forwarded to the Service Provider for disposal through e-Auction.
• Sale of those surveyed off lots shall be concluded in favor of H 1
bidder for which the H1 price offered by the H 1 bidder is more
than or equal to 90% of the Reserve Value for Non-Hazardous
scrap.
• The remaining Equipment / P&M /Other Scrap which could not be
sold in first auction, shall be put up for e-auction second time. In
second auction Sale of those Equipment / P&M and Spares/stores
shall be concluded in favor of H 1 bidder for which the H1 price
offered by the H1 bidder is more than or equal to 85% of the
Reserve Value for Non-Hazardous scrap.

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